Google, Microsoft Execs Advise on Exit Strategies During a Recession

Need an exit strategy? Mergers and acquisitions experts from Google, Microsoft, Sun, IBM and Symantec offer advice for startups and other high-tech businesses looking for an exit strategy during this recession. The tough economic climate is rough on erstwhile search engines, as well as providers of enterprise applications, messaging and collaboration software and Web services. The lesson? Don't get on the big vendors' bad side with repeated offers.

During a recession, it's common for industry watchers to wonder what will happen to startups looking to get off the ground.
MySpace CEO Chris DeWolfe told Reuters
companies are knocking on the leading social network's door to get
bought. Startups worth between $200 million and $300 million six months
ago are now running out of money and willing to sell themselves for $20
million or $30 million, he said.

Conversely, some companies that were once candidates for acquisition are going it alone. For example, Digg CEO Jay Adelson told BusinessWeek Digg's goal is to build an independent business that reaches profitability as quickly as possible.

Clearly some companies are suffering and seeking exit strategies. TechCrunch's dreaded deadpool is beginning to thicken, a nasty stew of misery and shattered dreams. Others, such as Digg, are moving forward.

This means companies that don't go under are ripe for the picking,
right? Not necessarily, according to a panel of corporate development
experts cobbled together for the Venture Summit Silicon Valley 2008
show in Half Moon Bay, Calif., Dec. 2.

Moderator Richard Hanley, a principal at KPMG, asked executives from Microsoft, IBM, Sun Microsystems, Google and Symantec if the M&A experts have changed the way they evaluate target companies in the last few months.

Claudia Fan Munce, managing director for IBM's Venture Capital Group,
said price tags for companies plummet when their banker's call to make
a quick sell. As long as Munce feels IBM can reap the level of revenue
it is comfortable with regardless of the economic climate, the target
has a shot at a lifeline.

However, vendors such as Sun take its own declining business into
consideration when looking at acquisitions, Sun's Brian Moriarty, vice
president of corporate affairs, said. He added:

The environment for targets right now is very dislocated, and so
when you talk to a company about their projections and what they think
they can do, it was a little suspect but now it's even more so. That
makes pricing and having a principle discussion and negotiation much
more difficult. We're being a lot more selective, the hurdle has gone
up for us.

However, he said companies that are well funded and have a good
business don't have to sell and are less inclined to do a deal at a
time when their valuation will be lower because of the recession. Digg,
which banked $28.7 million in new venture capital this past September,
fits this description.